Tuesday, July 14, 2015

Is "lame" the right word to describe the minimum wage?

Link here

Republican presidential candidate Scott Walker called the minimum wage "lame".  But is that the right word?  It's a good start to attack terrible policies like the minimum wage - but simply calling it "lame" makes it seem like it causes no harm.

A better term is needed.  That said, what is the right word for a policy that:

* Keeps teens from gaining important life skills that would have helped them not only earn money now, but gain valuable work experience which will help them get better jobs later?

* Causes firms to switch from hiring people to hiring machines?

* Prompts people who would have worked for $5/hour but can't get a job at $7.25/hour or higher to seek other options for income?  Some will choose to work in illegal markets (selling drugs, etc.).

* And has other bad consequences?

No, lame is not the right word for the minimum wage.  But it's better than what most politicians are saying.

Sunday, July 12, 2015

Learning Economics Through Pictures - Washing Cloths

Thanks to Dirk Mateer for taking and posting this great picture on his facebook feed!  (And for his permission to use it!)

As Dirk writes:
Check out the photo at the self laundry facility! See the old black and white photo of the women washing and drying by hand above the new stainless machine? Those labor intensive jobs are long gone but society is better off because it takes less time to wash and dry than before.

He's absolutely correct here.  This is a great example of an innovation that displaced labor.  Throughout history, there have been thousands of innovations that have caused tasks to be completed less expensively and with less labor.  At the time, however, those tasks could cause some pain to those who are displaced.

Even today we hear about machines replacing people at tasks (and some previous pictures I've posted have covered that).  In the long run, however, when more is produced using less labor - society is better off!

Wednesday, July 1, 2015

The 2015-2016 Liberty and Economic Freedom Speaker Series

Exciting news from the economics department at Susquehanna University!  In 2015-2016 we will be bringing three speakers to campus!  This is a continuation of the Liberty and Economic Freedom Speaker Series started last year.  We had a great lineup last year, and the 2015-2016 academic year should be just as fun and educational.

We have three speakers now confirmed for the 2015-2016 Liberty and Economic Freedom Speaker Series!  They are ...

David Kendall 

Morality and Capitalism: A Dialogue on Freedom. 
Tuesday, September 29, 2015

David Kendall is a Professor of Economics and Finance and Chair of the Department of Business and Economics at the University of Virginia's College at Wise. Previously he was the Dean of the School of Business at St. Edward's University in Austin, TX and Chief Economist for Empire Funding Corporation, also in Austin. While a senior economist with RTI International in Research Triangle Park, NC, Dr. Kendall led numerous applied economics research projects conducted for FDA, EPA, and USDA. 

Dr. Kendall is the author of the book Morality and Capitalism: A Dialogue on Freedom. He earned his Ph.D. from NC State University.  Matthew Rousu, professor of economics and Warehime Chair, will interview Dr. Kendall on stage in a conversational style and there will be opportunities for audience members to ask questions.  

Carrie Kerekes 

Free-Market Environmentalism
Thursday, November 5, 2015

Dr. Carrie B. Kerekes is an Associate Professor of Economics at Florida Gulf Coast University.  Her research interests are in the areas of applied microeconomics; public economics; and economic development, with an emphasis on institutions and private property rights.  Dr. Kerekes has published several articles in refereed journals including the Journal of Law and Economics, the American Law and Economics Review, The American Journal of Economics and Sociology, the Cato Journal and the Review of Law and Economics.  Dr. Kerekes conducted field research on land titling in rural Peru in 2007.  She regularly attends the meetings of the Association of Private Enterprise Education (APEE) and the Southern Economic Association (SEA).  Dr. Kerekes serves on the Executive Board of APEE and also serves on the Board of the Freedom and Virtue Institute (FVI).  She has participated in seminars sponsored by the Foundation for Economic Education (FEE), the Institute for Humane Studies (IHS), and the Charles Koch Foundation.  She received her Ph.D. in Economics from West Virginia University in 2008.  

Dirk Mateer 

Economics in the Movies
Thursday, February 25, 2016

Dr. Dirk Mateer is the Gerald J. Swanson Chair in Economic Education at the University of Arizona. Dr. Mateer’s research has appeared in the Journal of Economic Education as well as other journals and focuses on media-enriched learning. He is the author of Economics in the Movies (2005) and Principles of Economics (2013, with Lee Coppock). 

Dr. Mateer is also an award-winning instructor. He has been featured in the "Great Teachers in Economics" series put out by the Gus A. Stavros Economic Education Center at Florida State University. He was also the inaugural winner of the Economic Communicator Contest sponsored by the Association of Private Enterprise Education. While he was at Penn State, he received the George W. Atherton Award, the university’s highest teaching award, and was voted the best overall teacher in the Smeal College of Business by the readers of Critique Magazine. Now at Arizona, Dirk received the Large Class Faculty Member of the Year award from the Eller College of Management in 2015.

Friday, June 19, 2015

Theme Park Economics - Disney and Universal Orlando

I just returned from Orlando after a trip with my family.  We visited both Universal Orlando theme parks and Disney World.  The parks are pretty fascinating for an economist to visit as a couple economic principles are demonstrated quite vividly. 

First, you see the monopoly power these parks have when selling concessions inside the parks based on the prices they charge.  Meals that would cost $5.00 or less outside a park are considerably more.  For example - how much do you think a fast food restaurant would charge for a hot dog and fries with no drink?  Naturally, it would depend on the place, but it's tough to imagine paying more than $4.00 or $5.00.  At Disney you pay $7.49 for the same meal.

This monopoly power holds when purchasing drinks as well.  A 20 ounce soda that costs about $1.50 at a gas station or McDonalds costs about $3 in either Disney or Universal Studios.

Second, you see great examples of price discrimination.  Disney does this in several ways.  First, look at the pricing schemes for tickets based on the number of days you're visiting ....

The first three days in the park each cost about $100 - after that it drops quickly.  (Note: these admissions to the park must be used within a 14-day period)

Disney also charges a bit more than other local hotels for those who want to stay on Disney property.  The benefits include more of the "Disney experience", quicker access to the parks, earlier access to ride-reservations, along with more convenient busing access across the properties.  Disney offers more immersion into the "Disney Magic" for those willing to pay more.

Within the Disney properties, you also see dramatic differences in pricing schemes for different hotels, as you can see from this image:

(Note - this includes tickets for a family of 4 - but those costs remain the same regardless of the property.)  The

Universal Studios in Orlando price discriminates as well, but they take it a step further with their Universal Express program.

This option isn't cheap for a family, however.  There are two ways to obtain these passes.  You can purchase them outright - for our family of five this would have cost over $300 for a day (after taxes).  
Instead we chose to spend one night at a Universal hotel to obtain these passes.  The hotel was walking distance to the parks, which was nice, but it was literally three times as expensive as a comparable room that was 1.5 miles away.  That said, our hotel reservation meant we received Universal Express passes for two days - the day we arrived and the day we departed.  While expensive, the total hotel price was less than if we'd paid for one day of express passes separately.  They also allow early park access.

We found this incredibly valuable!  Having the express pass for two days, we saved several hours of time we would have spent in line, allowing us to enjoy the parks far more.  When you have a limited amount of vacation time, an hour of vacation time is far more valuable than an hour of non-vacation time, and we found that Universal Express was well-worth the extra money to stay in the on-site hotel.  

The Universal Express option is an excellent way for Universal to price discriminate.  Those whose demand is lower can simply buy the regular admission tickets.  But through express passes, Universal offers a way to extract more money from those who have a higher demand.

We enjoyed our vacation!  But it is also interesting for me to see the economics at play in the parks.

Quoted in NPR on fracking story

Link here

Rousu was quick to point out that he disagrees with Wolf on many issues. For example, he’s not convinced the state needs a new tax on gas production.
“I think they’re doing a lot of things wrong.” Rousu says of the Wolf administration. “But this change seems pretty reasonable to me. The previous jobs number did seem high. But 90,000 is an enormous number. It’s 1.5 percent of workers in the state.”

Wednesday, June 10, 2015

Proper benefit-cost analysis when taking death penalty positions

In a sensational “Shawshank Redemption”-style prison break, a pair of cunning convicted murderers used power tools and tunnels to escape an upstate maximum-security penitentiary near the Canadian border.
A massive manhunt was underway Saturday after killers Richard Matt, 48, and David Sweat, 34, were discovered missing from the Clinton Correctional Facility in Dannemora, about 25 miles from Canada, officials said.
The inmates made their extraordinary dash to freedom after faking out guards with makeshift dummies made out of hooded sweatshirts to appear as if they were still sleeping inside their cells. And once officials discovered they were gone, they found a note from convicts telling them to "Have a nice day!"

When people argue about whether society should have a death penalty, sometimes the argument is strictly based on moral arguments.  But when it is not, sometimes the costs of the death penalty are brought up, and usually by those opposed to the death penalty as the costs of imposing the death penalty are high.

I don't buy into this argument against the death penalty, however, as the reason it is high is precisely because death penalty opponents use (and abuse?) the legal process to drag out appeals for decades. Regardless, some will use this argument to say that life-in-prison sentences should be used instead of going for the death penalty.

However, one thing that is rarely considered in these arguments is that when someone isn't executed, there is a non-trivial chance they'll murder again.  This can happen within the prison or, like the story above, when prisoners escape.

A true benefit cost analysis should factor in that "life in prison" for a convict really means "will probably spend life in prison".